Despite bigger fourth-quarter profit, GM earnings fell last year

Chevy trucks line the lot of a dealer in Murrysville, Pa. GM said its fourth-quarter… (Gene J. Puskar / Associated…)

General Motors Co. profits grew substantially in the fourth quarter, but for all of 2012, the company made less money than it did the year before.

GM said its fourth-quarter profit grew 89% to $892 million from the same period a year earlier. For the entire year, profits sank 36% to $4.9 billion as earnings in North America leveled and losses in recession-plagued Europe mounted. Sales rose to $39.3 billion in the fourth quarter, up from $38 billion in the same period a year earlier.

“It was a modest miss but not terribly far off from where [investor] expectations were,” said Peter Nesvold, an analyst with Jefferies & Co.

In early morning trading, GM’s shares rose 64 cents, or 2%, to $29.31

“Some of the operating metrics are going in the wrong direction, the operating margin, pricing, inventory and market share,” Nesvold said. “Most of that should be self-correcting over the next 12 to 18 months as they roll out a lot of new products.”

With the launch of the seventh-generation Chevrolet Corvette sports car at the North American International Auto Show in Detroit last month, GM entered a period where it will replace nearly all of its aging product lineup with redesigned models for its core North American market.

GM officials saw the results as a continued recovery from the automaker’s bankruptcy reorganization and federal bailout of 2009.

“We recorded another solid year in 2012 as we grew the business, delivered a third straight year of profitability and took significant actions to put the company on a solid path for future growth,” said Dan Akerson, chairman and chief executive.

GM’s North American operations earned an operating profit of $1.4 billion in the fourth quarter, down slightly from $1.5 billion in 2011. Based on the region’s financial performance, the automaker will pay profit sharing of up to $6,750 to approximately 49,000 union employees.

GM's U.S. auto sales grew by just 3.7% last year to about 2.6 million vehicles, according to Autodata Corp. Its growth was well below the industry's 13.4% rate. GM's U.S. market share slipped to 17.9% in 2012 from 19.6% in the prior year.

One worrisome trend in the U.S. market is GM's growing inventory of trucks, just at a time when it is about to bring out new models of the Chevrolet Silverado and GMC Sierra. Barclay's Capital analyst Brian Johnson estimated the inventory could reach 120 days by the end of this month, up from 80 days in December.

Johnson said GM may have to cut production of trucks as it gets ready for the transition to the new models.

"However, GM may have alternate means to solve the overhang by adding attractive warranty and maintenance options to the old trucks, which would prevent production cuts, while also maintaining healthier incentive levels," he said, adding that such a strategy "would appeal to the commercial buyers who utilize a total-cost-of-ownership approach."

Losses in Europe widened to $699 million for the quarter from $572 million in the same period a year earlier. For the year, GM lost almost $1.8 billion, more than double its European losses in 2011.

“Europe was a little worse than expected but it is a pretty tough environment there this year,” Nesvold said. “But the rest of international was pretty good.”

South American operations swung to a profit of $99 million in the latest quarter from a loss of $225 million in the same period a year earlier.

The rest of GM’s international operations – mostly China – saw operating profits grow to $473 million in the fourth quarter from $373 million a year earlier.